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Accident Compensation Cases

New Zealand Society of Physiotherapists v Accident Compensation Corporation (HC, 06/05/88)

Judgment Text

EICHELBAUM J:
This is an application for a stay of proceedings in relation to the judgment delivered by Quilliam J on 3 February 1988. Nothing turns on any distinction between a stay of proceedings and a stay of execution. The judgment was delivered on an application for review of a decision of the Accident Compensation Corporation (ACC) in respect of fees payable to physiotherapists under the Accident Compensation Act 1982. The issues centred on the question whether the ACC was discharging its statutory duty to pay the cost of physiotherapy treatment for persons covered by the accident compensation scheme. The contention for the plaintiff was that under the statute payment to physiotherapists for services supplied to injured persons was required to be made at a rate consistent with fees charged generally by physiotherapists throughout the country. The statistics before the Court at the hearing in December 1987 were that there was a significant gap between the ACC's payment for a routine treatment, which amounted to $11.50 (the level of what is known as the annotation line) and the average fee being charged by physiotherapists throughout the country which at that time was $15.21. The annotation line figure had been fixed as at 1 August 1985 and not increased since. Accordingly — and I am stating all these propositions in short summary form only — physiotherapists are left with the choice between charging the patient the difference between their fee and the amount the ACC was prepared to pay — imposing a so-called “surcharge” which might or might not be recoverable from individual patients, or alternatively foregoing some of the fee which they might otherwise reasonably charge for each service. Quilliam J found in favour of the plaintiff and granted a declaration that the ACC was in breach of its statutory duty to pay physiotherapy fees which are reasonable by New Zealand standards. 
On 15 March 1988 the defendant filed a notice of appeal, accompanied by the present application for stay. Counsel informed me that the case on appeal, which will be extensive, is in the course of preparation. Counsel were unable to give any precise indication of how soon the matter might be expected to come before the Court of Appeal but suggested that an estimate of four to six months might be reasonable. Having regard to what is at stake the possibility of a further appeal cannot be discounted. 
Although the remedy granted to date is limited to a declaration, before Quilliam J the defendant gave an undertaking that it would act on such. In the result, if no stay is granted the plaintiff will take steps to initiate a revision of the annotation line. If agreement is not reached a further approach for the Court's assistance, pursuant to leave reserved, could be expected. 
Turning to the principles to be applied, in R v Merchants Assn (No 2) (1912) 32 NZL 173 Sim J listed a number of relevant considerations. Although I do not think for a moment that the were intended to be exhaustive, it is useful to refer to each. The first is whether the applicant's right of appeal will be rendered nugatory if no stay is granted. It is common ground that if the annotation line were increased as sought and the ACC's appeal to the Court of Appeal was later successful, there would be no practical way of recovering those increases. The amounts involved are very considerable; over a four month period they would amount to nearly $2.4 million. The true figure may turn out to be greater, having regard to the possible outcome of review proceedings in relation to individual claims pending within the ACC system which presently are handing fire. Thus it is clear that while the failure to grant a stay will not render the right of appeal nugatory in any absolute sense, it will be rendered nugatory in relation to the period which will elapse between the time the annotation line is increased and the final disposal of the matter in the Court of Appeal; and even if it is possible to have the appeal dealt with promptly, the money involved ill be substantial. On the other hand, as has been pointed out on behalf of the plaintiff, the sum involved has to be considered in the context of the defendant's annual expenditure which is in excess of $500 million. 
The second consideration is whether the successful party will be injuriously affected by a stay. This brings out the converse of the previous point. On behalf of the plaintiff it has been deposed that if the defendant's appeal be unsuccessful there will be no practical way for physiotherapists to recover from the ACC fees lost in the past, that is the fees which theoretically they could have charged to their patients above the annotation line figure but decided to waive, or which they charged to the patients but were unable to recover from them. Quilliam J at the conclusion of his judgment discussed the prospect of a direction to the ACC to reopen past transaction but decided that it would be a “practical impossibility” (p 38). That was said in respect of past decisions extending over a much longer period than four months but with the number of services running at their current level it would seem to be equally impracticable to reopen past transactions over even a four month period. That was accepted by counsel for the ACC, who was unable to offer any solution by way of undertaking or otherwise. 
Apart from the monetary aspect, the plaintiff's members also bear the entire brunt of the adverse public reaction arising out of the situation that the majority of physiotherapists feel obliged to surcharge their patients. Understandably, many persons injured by accident are surprised to find that the ACC does not fully reimburse the expense of their physiotherapy treatments. 
The next point is the bona fides of the applicant as to the prosecution of the appeal. For reasons developed in detail the deponent of an affidavit in opposition to the application for stay has stated on behalf of the plaintiff society that it believes that the ACC's whole strategy at present is to stall and delay everything which will result in an increase in the cost to the ACC of medical treatment for people covered by the scheme. Although this matter was further developed in argument, not without some support from the evidence, Mr Wild accepted that so far as the proceedings themselves were concerned the corporation through its counsel had cooperated fully in bringing the original action on for hearing, and there is no reason to think that the appeal will be treated any differently. For purposes of this application I think it would be right to take the view that the defendant has a bona fide interest in pursuing an appeal, at the same time noting that further effluction of time will suit the ACC's interests in the event that a stay is granted. 
The fourth of the headings arising from R v Merchants Assn (No 2) is the novelty and importance of the question involved. I do not think that the case involves any novelty so far as matters of legal principle are concerned. Its importance to the parties is considerable. There is also a distinct element of public interest. Members of the public requiring physiotherapy treatment as the result of accidents falling within the scheme are interested in recovering the cost of their physiotherapy treatment in full. It is important to such persons to have full access to treatment. To the extent that the loss arising out of the gap between the annotation line and the reasonable charge for services is not being borne by members of the plaintiff society, it is falling on members of the public. It is clear from the decision of the Court of Appeal in Philip Morris (NZ) Ltd v Liggett & Myers Tobacco Co NZ) Ltd [1977] 2 NZLR 41 that it is proper to take a public interest factor into account. In fairness one must add that if the ACC is compelled to increase the annotation line, but later succeeds on appeal, the funds which will have been wasted, since the payments will be irrecoverable, are public funds. 
As well as referring to R v Merchants Assn I have refreshed my memory of a number of other cases; the authorities on the topic are gathered in McGechan on Procedure at pp 4-44 to 4-46. In my view these specific criteria discussed in R v Merchants Assn and other judgments should be regarded as pointers in the search for what is just between the parties on the facts of the particular case. That that is the ultimate objective is emphasised by reference to the judgment of Richmond P in the Philip Morris case at p 42. 
In summary form, Mr Upton's contentions in support of a stay were these: 
1
It preserves the status quo. 
2
The decision under appeal has a fundamental impact on the ACC's fee paying functions. Here Mr Upton referred to the flow on or ripple effect on fees payable for other health care services. 
3
The decision reversed a long standing practice. 
4
The ACC has a genuine desire to test the matter on appeal. It has a substantial argument to put forward on appeal. 
5
The ACC will continue to cooperate with the plaintiff to get matters resolved-specifically, will use its best endeavours to get the appeal heard as quickly as possible. 
6
If a stay is not granted: 
(a) the additional cost to the ACC will be very large; 
(b) there is no provision for that increase in its present funding; 
(c) if the appeal is successful there is no way that the ACC can recover such increased payments back from physiotherapists let alone their individual patients. 
7
If stay is granted physiotherapists will (in the main) still get payment in full, mostly from the ACC and the balance (surcharge) from the patient. That surcharge is spread across a large segment of the community, approximately two million treatments for the current year. 
I have already commented directly or indirectly on a number of these and need add only the following. As to (1) and (3), the status quo has been held to be contrary to law. There can be no particular merit in preserving it. At this stage, the situation does not equate to that of an application for an interim injunction or order. As to (2), I accept the importance of the decision to the ACC's fee paying functions. If there is no stay, there is the chance that extensive administrative steps will be taken, or at least commenced, which will later require reversal. Although no particular stress was laid on the point, possibly because it is obvious, I regard it as a distinct one in the applicant's favour. As to 6(a) and (b), the sum while large, represents only a fraction of the ACC's total budget. As to (b), in light of the history of the matter I find it surprising, to put it mildly, that the defendant believes it can make any capital out of that. 
At first sight No 7, that the plaintiff's members, by and large, will still get paid in full seems a compelling point. But on reflection, if the ACC expects to pay out an extra $2.4 million over four months, that must represent the amount of the shortfall which physiotherapists and their patients (members of the public) will have to bear in the event that a stay is granted and the appeal should fail. 
It is apparent that whichever way the present decision goes, if the party unsuccessful on this application is subsequently successful on the appeal there, will have been an irremediable injustice in respect of the extra ACC payments, or their absence, in the period from now until disposal of the appeal. In that situation I In influenced by these factors in particular. First, I should give weight to the judgment of this Court. That presently is determinative of the rights of the parties, its effect being that since 1 August 1985 the entitlements of members and patients of the plaintiff have been governed by a decision based on criteria contrary to statutory requirements. Prima facie the plaintiff is entitled to have the judgment in its favour carried into effect. Grant of a stay would leave the plaintiff in the same position as before the judgment, with the added disadvantage that it no longer had the primary control over the progress of the proceedings. Secondly, if a stay is refused the incentive will lie with the ACC to have its appeal disposed of without delay; since the ACC has the carriage of the appeal it is in the best position to see that speedy disposal is obtained. Putting it the other way around, that situation is preferable to one where the carriage of the appeal is in the hands of the party in whose financial interests it lies not to hurry. Perhaps it is a small point but in that respect I note that some six weeks elapsed before the notice of appeal was filed. Thirdly, if someone has to suffer an unjustified loss over this period it is better spread over the wide group which provides the ACC funds than the narrower one which carries the burden of what in terms of Quilliam J's judgment is the present ACC underfunding of physiotherapists' fees. 
Balancing all factors, my conclusion is that the defendant has not made out a case or a stay. The application is dismissed with costs in favour of the plaintiff of $750. 

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